Cryptocurrency was a cryptic concept when Bitcoin first appeared in 2008. Now, a decade later, there are over 1,600 different cryptocurrencies, with a total market value of $300 billion. And along with this new wave of currency came a new way to manage it; blockchain.
As these new technologies and currencies revolutionize the way we spend money, we have to adjust our regulations and investing methods to take them into consideration. For example, many entrepreneurs have started using an initial coin offering (ICO) to raise startup funds. Essentially, this is the cryptocurrency form of an initial public offering (IPO).
The ICO investors are promised a digital token which can later be used in the new cryptocurrency application. ICOs received over $13 billion in total during the first half of 2018. However, there are many regulatory challenges surrounding ICOs. Some ICOs are very similar to securities, and therefore it seems like anyone conducting an ICO should register with the Securities and Exchange Commision. However, this does not hold true for all ICOs. Should different regulations apply to different types of ICOs, or should one standard be applied to all?
The main concern with cryptocurrency is that it can fill the role of many different things at once. It can be used as money, a security, a property, and a commodity. Because of this, multiple regulators might be asked to manage any given cryptocurrency, and this presents a problem.
These new technologies are pushing the limits of our current governmental framework, the core of which was created in the 1930s. They no longer fit into the regulations that we have in place, and this is causing major issues. For example, some ICOs comply with federal securities law, but not state money transmitter laws, and are thus illegal.
Major changes need to happen, but major changes don’t come easy. Only time will tell what the future holds for cryptocurrencies, and for the way we as a society handle money.